Should You Rent An Apartment Or Purchase A Condo?
Real Estate
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If you're interested in independent living, but don't want to deal with the hassle and expense of owning (or renting) a home, you may be browsing apartments, townhomes, and other attached living arrangements. However, you may also be asking yourself whether buying a condominium or renting an apartment is the more financially-savvy move. Read on to learn some of the primary advantages and disadvantages of each option to assist you in making this important decision.
What are some advantages and disadvantages of renting an apartment?
Renting an apartment is often the first step taken when moving out for the first time. It can provide you with a new sense of independence, while still allowing you to maintain the flexibility of non-ownership.
- Advantages to apartment rental
- Flexibility
- Although you'll be required to sign a lease that promises you'll pay rent for a specified period of time, you are free to terminate your rental at the end of the lease and move elsewhere. Under certain circumstances -- such as if the landlord fails to make repairs or keep the apartment in livable condition -- you may be able to terminate your lease early without penalty.
- If you're currently single and/or childfree, but your future plans include marriage and/or children, your space needs may increase. Renting an apartment allows you to fulfill your current needs while still being able to move to a larger apartment or purchase a home in the future.
- Location
- In many areas with a high cost of living, renting an apartment in a desirable location is much less expensive than the down payment and property taxes required to purchase in the same area.
- Disadvantages of apartment rental
- No way to build equity
- When you rent an apartment, you are paying for the owner's investment in the property. Although many states may let you deduct rental costs on your taxes (like you would deduct mortgage interest), your payments themselves are not helping build your own equity or increase your net worth.
What are some advantages and disadvantages of purchasing a townhouse or condominium?
Purchasing and renting have clear differences, but purchasing a condominium instead of a single-family home comes with its own key advantages and disadvantages.
- Advantages of townhome purchase
- Limited maintenance and landscaping expenses
- Homeowners are often advised to set aside 1 percent of their home's purchase price (or $1 per square foot of the home) for maintenance and other home-related expenses -- per year! In a townhome or condominium, most exterior maintenance such as landscaping, gutter cleaning, fencing, and roof repair or replacement is handled by a central Homeowners Association (HOA) for all owners in the complex.
- Although condo owners will pay annual dues to help defray the cost of these expenses to the community, these dues are often less than homeowners will pay, and the hassle of arranging for repairs is avoided.
- Disadvantages of townhome purchase
- Resale headaches
- In addition to the lack of flexibility afforded by any home purchase, condos and townhomes can have specific challenges upon resale. Because most units in a building are very similar in size, finish, and condition, your neighbor's resale price can substantially affect the amount you're able to get for your own townhome.
- Hurdles to rental
- Often, homeowners who can't afford to sell but have outgrown their current home will turn to rental service. However, depending upon the regulations of your HOA, you may be unable to rent out your townhome. Most HOAs will restrict the number of units in a complex that can be rented at any given time -- and if your unit would push the complex over its limit, you may have to join a waiting list before you can rent out your unit.
All in all, the choice to rent or purchase is a very individual decision and can be impacted by thousands of tiny factors. Hopefully the above lists have given you a starting point on your decision.
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11 November 2014
